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Bailey McCann, Opalesque New York:

Investors started off the year by piling into BBB bonds, and they've been paid for it. Performance is up and investors are buying up new issuance. A recent Bank of America survey of fixed income managers showed that nearly 40 percent expect that the BBB category will outperform over the next 12 months. But one investor is skeptical. Opalesque caught up with Christopher Zook, Founder, Chairman and Chief Investment Officer of CAZ Investments during the Cayman Alternative Investment Summit, and he says the complacency surrounding fixed income is potentially dangerous at this point in the cycle.

BBB bonds, the lowest investment grade bonds are now a significant part of the fixed income universe. BBB bonds account for more than $2 trillion of the debt market, up from $750 billion pre-crisis. When these bonds are downgraded they fall into the high yield or junk bond market.

Investors avoided BBB bonds last year as markets feared a potential recession and worried about corporate balance sheets. But after a year in the doghouse, yields on those bonds have made them hard to pass up. According to Zook, that could be a problem. "There are enough institutions invested in this part of the market that if you start to see downgrades a lot of people are going to be forced out because of their inve......................

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